Earnings call transcript Q4 2023

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, thank you for standing by. My name is Brent, and I will be your conference operator today. At this time, I would like to welcome everyone to the Smartsheet Fourth Quarter Fiscal 2023 Earnings Conference Call. [Operator Instructions]

It is now my pleasure to turn today's call over to Mr. Investor of Head Turner, Relations. Aaron ahead. Sir, please go

Aaron Turner

everyone, Thank quarter fourth welcome, earnings you, Good afternoon, Brent. to of Smartsheet's call. and fiscal XXXX year

release Smartsheet's CEO, discussing in Mader; and closed We results Pete Mark With issued Godbole. CFO, press today. are be market after today will me our the the our announced

which webcast in that also relations is be Events investors.smartsheet.com. at Today's accompanies website our website. replay prepared a for investor viewed being There's call presentation can available section of and will slide the Pet's remarks, investor be on relations our

call, During the federal will this of laws. we within make forward-looking securities meaning statements the

of these based and but including, limited financial have and and These our other projections to, on future not in SEC our website Relations those forward-looking on We on number our at available trends. current the subject expectations SEC website risks statements largely Investor are filings forward-looking factors, and events statements described about a www.sec.gov. to

in are the call of are of that we information and statements assume new law. and this the except during Although may to not actual to future these obligation us made update available adversely. or any All forward-looking do materially reasonable, by the expectations based as we differ events, results today, our forward-looking believe reflected statements as statements information on result as required

GAAP directly accompanies U.S. we Investor can certain that website. financial non-GAAP which be comparable reconciliation is the discuss the GAAP will on In also addition the most financials, our call, U.S. to measures. A available Relations this to found presentation measures in

to over call the turn me let that, With Mark.

Mark Mader

'XX. quarter earnings to our for call and fourth fiscal welcome year Hello,

flow bookings, collaborative added for to year extended free-cash position for Smartsheet, strong generated our marketing solutions, year platform, quarter customer the our the first ever acquired fourth off in positive results X.X delivered which outfit to we million our Our and management Smartsheet management, year strengthen and new a creative best in the for leadership year time. for cap work a users

some added of for was to annual $XX Pete details, While our We provide bringing ARR from $XXX Revenue more additional $XXX QX, will highlights quarter XX% million. than our to call in million, year-over-year. total up million in the out revenue recurring quarter. I want the

Volvo, In saw And wins Allscripts Today and QX, we TSO companies expansions Aviation, we at many cameras USA Experia. such new others. and among as at customer have

more now Our In or and within more motion $XXX,XXX customers with have customers customer by XXX had by over expansion our QX, total continued $XX,XXX more. base a of ARR and XXX than expanding $Xmillion million. transactions of XX we expanding two or $X with

impact Despite change in rates these environment negatively successes segments. seen the customer expansion macroeconomic we've across

customers However, these enterprise even less exhibit to favorable our continue macro rates. growth fastest with the backdrops,

enterprise. in strategy on have success And great segment. the product seen focused investment winning this and Our go-to-market is we

for We 'XX. this and a organizations segment employees. over in have segment XX% dollar ARR enterprise FY X,XXX million over from customer opportunity grew $XXX XX,XXX now over with multi-billion Smartsheet. this now over We large customers, is represents defined revenue alone believe just as

like one environment, may to opportunity companies the that long-term we in spending some enterprise, the growth While drive in the more are. seen profitable enterprises, we remain best large this is we have and with enterprises thoughtful this especially being long-term, no category winning believe in

our QX changing flow, in exceeding actions the environment, macroeconomic profitability. to resulted profitability, took and 'XX, FY In in improve our non-GAAP free-cash operating income These we guidance. steps response to

'XX. with efficient of combined we look-ahead, to flow we positive margins expect increasingly our operating scale, operating generate free-cash model million FY and over our As $XXX in

in secured further and Smartsheet profitable collaborative as management. leader scale the work Our model business

operating profitability that category. level at and are ARR unmatched rate in adoption are an We enterprise scale,

top-five a tier the top review top recently in class recognizes platform Enterprise earned products leadership XXXX anywhere and Products have list, rank is making enterprise companies best-in XX. Best by This list CWM the GX's recognized experiences. to us and customer service, We only placement The position on sites for software publications. that

were management for this earlier in management work the we leading our Fast industry list month, on Most digital and solutions enterprise Companies enterprise recognized And Innovative category. Company's asset

QX. adoption capabilities Capabilities make subscription success. Smartsheet, At of key points year-over-year. up expansions of based capabilities products our drove our a large play in customer These revenue, now XX% five our enterprise in role many up

of projects For January, created that and suite management XXX% more give example, three-year signed a more year-over-year center to forms, created provider more a capabilities. control a XX% company, human WorkApps. all access will enterprise license a Smartsheet Through on XXX% at the capital leading agreement they provisioned advanced X,XXX full enterprise users basis, at

A sensitive their manage security use gives ability manage at provider the on Smartsheet our for at where services grade them in our while customer to platform, deployments. case standard has to become global professional is customer this they Smartsheet Smartsheet collaboration. because deployments still in award, key part enterprise HCM data allowing customer use efficient for

more company collaborators model secure Smartsheet to allowed Our has from than to different platform. external collaboration the client XX,XXX bring this organizations on

to strong Smartsheet Advance. This upgrade A the figure a from higher viral Smartsheet across quarter for Fortune six high a of XXX expansion included annual organization. had that a was resulted advanced the an global QX manufacturer adoption upgrade here.

XXX% created control to billion Smartsheet over $X used WorkApps cost-savings provisioned achieve help they company and initiatives. now X,XXX projects This dashboards, center. This by use operational three-year increased its X,XXX their nearly will alone, using year

customers' to was their to Advanced driven departments users users increased by eight across Smartsheet. usage countries adoption now also Smartsheet Smartsheet. XX million. more brought $X This as deal and ARR work at a demand XX,XXX seven-figure Over through in look a on telecom use XXX drove connected over Fortune the which teams expansion company, total centralize

grows. Jeera such and organizations. WorkApps, the the projects for of workflows Flac, starting essential integrated as of center, speak is more Salesforce, as to XXX dashboards. Smartsheet external X,XXX as XX,XXX of these X,XXX over underpins increases such power as value of the the using the model than where and hub managed platform It span serves the company's for Advance with now Win and Our collaboration control thousands use point that over apps Smartsheet

we January, organizations Management every which say, Report, XX% our In workers done Future for by management over published that at doesn't include project manager. whose being is level job showed of across description Work Inaugural people title project

of say this This The current gap investments the to perception of workers XX% research showed in made drives tools. significant necessary feel who flow respect for tools, Smartsheet. robust a they've XX% of but project and way. a between with also gap their leaders responded leaders just management opportunity workers continuous

the at a how empower people which Here and company. RFP Fortune example global best biopharma we tools three our of footprint an QX, against can transformation. business expanded XXX a competitors, great win CWM In is had

automate this Smartsheet of to were to based initiative system order when and design paper process. the company's seeds The purchase time one planted team management win took based consuming and a in complex organization member purchasing the the email

Smartsheet didn't also company's reached is company's where management, just critical initiatives. platform Smartsheet office, the transformation now PO or modernize supporting the

Company the of five positively helping transformation of WorkApps X.X that next manage dozens As billion are the of health now them business XX platform of Control guide Center impacting each workstreams towards the work, containing people the portfolios will Smartsheet strategic years. and goal in its company's

Smartsheet XXX another of enhancements. and product automation with application, the outfit, closed enhancements. of out customer-focused capacity view automation On over the having we delivered product numerous year innovation launched In QX, content desktop integration we front,

customers FY increased In for further and our and driving 'XX, also customers customers. sizes. will focused faster drive grow sophisticated as efforts power efficiency We work business-critical our us sell platform of to serve to on be well all how our we streams scalability with biggest and workflows thousands helping of emerging as investment

and and intelligence integrate value, platform. Smartsheet evaluate to we experience continue artificial into customer enhance the To

through Our AI XXXX our in scale, we intelligence. innovation AI intelligent enabled acquisition brand More engine content following our proprietary of powered have petabyte began Converse.AI,. recently, management

content recommendations Using models recognition and tagged, a predictive with And is for making assets creative navigation models, over to it powered year, for have easier people language Smartsheet. search. in find natural analyzed

we've on-boarding, designs generative unlocking discovery, are for 'XX early in and in promising the a for FY AI. beyond. Now, The accelerating business set progress can solving very our wave next and catalyst is of and on self-directed to growth impact our as the serve customer innovation, advanced made sights development

proud macro headwinds of navigating team position, executed driving efficiencies closing, and how I'm our FY In in the while leadership enterprise business. 'XX, in our significant expanding

that We investments continue to organizations. we keep drive our customers their needs enable them top-of-mind change for meaningful as prioritize to

enterprise platform the strategy, CWM model. business QX our scalability and of of showcase power of another our leadership, was our winning our the

continue 'XX in are momentum We this to beyond. and excited FY

of Board on appointed served Before He the of since Chair the acknowledge Board I as role. XXXX is the Chair our new been Pete, turn call to who over transition Geoff Board succeeds Smartsheet's of has recently on Board execution to want customers and Gregoire Mike years the We I followed, the value Barker, will the Chair our as following governance and appreciate and our His in transition. that company's ability since to private public and XXXX this his and for to transition thank and deliver Geoff during from commitment to leadership. remain We strengthen shareholders. to Directors.

His the expertise of next at phase late for XXXX. technology well growth. since scale Board aligns member very valuable Smartsheet in a been of operating has Mike our companies

more to forward are the and him with to We Chair welcome Mike position look working pleased to closely.

Pete? call Now, let over me Pete. the to turn

Pete Godbole

Mark, everyone. afternoon, you, Thank good and

We retention above quarter. our guidance Advance, expansion in continue posted rates As the saw the revenue for Mark and time. net quarterly strength was rate, to which a particular mentioned, and record largest strong contributed and We of across and billings exceeded dollar quarter. income bottom-line first the customers, level another who QX overall top exhibit our operating in our

past these customers. deal quarters, the rates macro-environment. among strength to of which and a smaller areas, longer sizes lower a sales worsening saw these expansion impacts our see Despite cycles, Similar we in we ultimately pressures manifest led to

previously In an maintaining to FY activities, operational capacity. resulted and our in flow operational free outperformance FY lower These to a for contemplated. efficiencies value by on contributed 'XX, has we cash operating path faster our than operating driving focused which efficiencies eliminating intense income in driving guidance profitability QX, while in on and efficiencies sales our focus We placed have 'XX.

macro have company capitalize to economy and expect to the in created, eventually occurs. we FY plan but improving positions that when We the the worsen 'XX,

while manner, sustained growth thoughtful initiatives. disciplined focusing continue profitability a on growth to pursue and to We capital allocating in and

strategy last And that focusing Our in invest this plan accounts part a on we areas. several to of four year the been years for has of thinking. large

widen dimension First, competitive our enterprise of on lead the scale.

Second, unlock adoption. and product led discovery

our Third, governance enhance experience. user fourth, elevate control security. IT, And and

that I Unless basis non-GAAP was a posted results references and for the fourth-quarter. presentation expenses in go through GAAP now earnings will call. our reconciled otherwise are the financial are and stated, to our on before results all release and full-year our results the operating and to

For We free-cash $XX of the of million. XX% ended recurring $XXX.X we million, a loss $XXX Billings of over revenue million total 'XX, million, up ended flow increase year-over-year. of $X.X year-over-year. and million. up full-fiscal XX% year-over-year million, with of year year revenue $XXX $XXX the with annual of Operating

more will revenue year. $XXX.X revenue fourth-quarter provide revenue Fourth up last of came growth from $XXX.X Next. subscription of revenue our of XX% Subscription color representing XX%. XX% Capabilities million, XX%. million, Services XX% representing QX million, at of up up year-over-year made I in revenue, was on results. was in $XX.X year-over-year. year-over-year financial quarter of growth

and annual billings with Turning total. XX% billings than of million, in growth at less to represented Approximately represented quarter of XX%. of were Quarterly of billings. $XXX.X representing billings. year-over-year subscription our approximately X% X.X% X% monthly. total the Multiyear Fourth billings semi-annual came

our Moving from $XXX,XXX of customers and respectively with year-over-year segments our XX% with of of over grew $XX,XXX X,XXX. ARR X,XXX to now with customers ARR XX% over represent These number coming XX% grew percentage The ARR. of customers The now on to reported and XX% to metrics. is year-over-year the XX%. total $X,XXX ARR number over customer ARR

year-over-year FY to of lower average We of remains our rate ACV XXX%. XX% trend The net our the quarter rate the year. rate $X,XXX. into full the in with X%. end-of-the 'XX, the Next, churn dollar retention dollar-based we assumption Consistent by ended net expect grew retention domain to our below high-teens the macro-environment with

Now financials. to turning back the

Our total gross was margin XX%.

Our QX Subscription XX%. gross margin was

for which improvement. a margin of or margin above remain $XX.X gross sequential operating Overall, point in revenue, quarter million percentage our to the in the quarter was flow $X.X expect XX%. 'XX income was positive million. represents Free-cash X% We X FY

to on move Now let me guidance.

Our guidance incorporated should our worsening upside into full expectations. current not a environment. reflects we the If the source expectations to year macroeconomic guidance conservatism our have of be more a macro-environment philosophy. decline, of Therefore, does this

rigor 'XX, operational result the in the in our initiatives, free-cash and focus changing in combined internal heavy scale FY natural in economies to business, adapt moderating placed flow and these we our profile 'XX, FY improvements In of with economy. plan our to macro hiring significant margin In will performance.

'XX, we to enterprise of the team platform. our invest are growth widening the In ramped FY in with sales in and investing advantage technology continue

As set-up natural a are approaching to we business 'XX. $X leverage of we operational scale, initiatives billion ARR, FY the started in that this

of of $XXX the be million million range of FY quarter revenue in million to be to in first the range For operating to we 'XX, and million. $X $XXX non-GAAP income the to $XX expect

non-GAAP to based million. of $XXX $X.XX weighted on expect to average $X.XX EPS shares be We diluted outstanding

$XXX expect representing our year growth 'XX, full-fiscal million, guidance the we million For XX% $XXX to XX%. revenue to of be to

revenue. total services expect We of be to X%

of to $XX income to million, per weighted and share X% shares representing diluted margin to to a in non-GAAP $X.XX non-GAAP operating the to of $X.XX million on the range our for year $XX net based approximately an average expect be million income XXX.X We X% be operating outstanding.

FY our for expect free-cash billings flow be $XXX XX%. expect we 'XX be growth FY to million. We And 'XX to

where highlighted strong durable profitability. emerging in long-term for was year outperformance, by see We FY us enterprise set up our QX another 'XX as conclude, our quarter, and continued strength investments growth. To enterprise the our a

to the Now turn let the over Operator? call me operator.

Operator

is [Operator with question Instructions] the Guggenheim Your of first John DiFucci Securities. from line

is line Your open.

John DiFucci

Well, Thank on Gregoire Mike to congrats all, Chairman first the position. you. of elevating

for our He view pretty guys also but how with see of least both power guidance straightforward. you also demonstrate sets really is of you business. It's I this think the the to he approach the profit next results nice software with well model at the year. in quarter, your

that see to great guys. it's So two,

But Pete, question, my a guidance said macro. you reflects worsening

gave a right But think specifics on sounds, metrics conservative around is productivity, little last some it pipeline, here. usual, rates, the close positive more comments you than and you attainment. quota to which So do its thing about go-to-market sales I quarter talked

-- steady this You them of -- are I here. close what that mentioned are said of all in assuming the year? sort things some guidance some in or sort sales some sort implied and of Can in and that of be - you'd moderate you think all of you actually there of of is this throughout also Are your most they fully hold those, what that and to force year those important rep moderate? you think are you sort hit too

Pete Godbole

down So, John, I'll you pass what that question to asked.

rate relative So a And transactions Advance expectations let's set, on start slight the sales with QX. We build exceeded saw the worsening our But to meant close and larger elongation relative we was, past the quarter, what nominal that did. a guidance we cycle. we to an trends. degradation through booking based we in the and in had as that

degradation It's a We're seeing slight the on. seeing that a pipeline. strong we're rate close

for as those it relates that worsening guide our building opted view. in normally given FY is, So in topline conservative what to phenomenon, be to we've a do 'XX

John DiFucci

And just I to quick what a to the the Pete. like high-teens could, sense. year. by clients -- that, It going follow-up end-of-the makes NRR if to the the sounds is said you that Okay, is

two ACV it subscription like I perhaps growth the imply does month realize thinking a not year-over-year trailing decelerate are growth you So led? year like and also as should metric, or that sounds progressively it the I the about -- or quite but throughout be that's XX that will is

Pete Godbole

So aligns the our retention billings guide. dollar John, net with rate,

the same just basic play rate. at dollar If the we factors topline, for macroeconomic through, are impact. walked retention you're of the guide And net affect seeing you those See, a the think billings intertwined. that are

is you but that from rate, rates, impact slight a pullback there growth macroeconomic a healthy pretty if a will. puts have those We

John DiFucci

this lot, Okay, all a is guys. makes that to sense. And good see. Thanks

Pete Godbole

Thanks, John.

Operator

with question Jefferies. is from the next Your line Thill Brent of

Your line is open.

Brent Thill

think back comments for And of on the to you demand like in seemed economic half? Europe the Thanks. kind what you are be worsening, U.S.? up pronounced see give just, just the enterprise that Pete, color more the it will countries? give seeing? the in did a factoring what in Was of versus color you that in headwinds -- Can Pete's us closed can multiple for across when monitoring more a geographic great. you're Mark, on are from it you little the about And back perspective, you enterprise, better. held Any

Mark Mader

Hi, Brent.

I that in extended think I was previous in one conversion out. pipeline of quarter how the things was played for the that of looking the quarter the

that things lot business net on really we over healthy $XXX,XXX, look encouraging converted to our $XX,XXX. I We when saw sequential last XXX, $XX, really see that numbers. customers. XXX, XXX over this the was, of extend one a at that over So $XXX,XXX in quarter. was business of over quarter, adds And We did added added

pleased that. to really it's So see

strength So we continue see there. to

think existing I how and value. revenue? it expectation you is one's drive you helping customers ones? helping Are sources my retained of what from you Are them me identify the connects on to helping new Are me priority to presenting savings? to

To something ability that help remains well. customers expand I and spoke savings drive to in and much or very spoke to my alive just remarks, to that

team -- the year. think year, into the had, we a a we have I probably like the have most heading I into which sales team ramp is feel going

part of think continue I our yield on to So will that business. nicely that

that motivated which Now, future as piece, we product, our builds I'm growth to the make continue the in investments growers. also drive all to product-led as --

lot, I year, which coming some that we lay enterprise growth. for -- future there's do this think also there foundation helped a So things but out about talk favorable really

Pete?

Pete Godbole

That's what customer I base of we more But Sure. SMB customers, saw our customers. see part part call little with enterprise macroeconomic year, where our saw smaller question, pressure it. of of saw really second bit little good the with over and a a your and And success did the pressure we it. Europe. in of sort one more so then, between that's probably We larger ARR texture we

Brent Thill

Thank you.

Operator

the question next of from Your Josh line Baer Morgan is Stanley. with

is Your line open.

Sophie Lee

Josh benefits and consolidating you conversations vendor this the any of I'm in of Lee saw outcome consolidation? Sophie If quarter meaningfully the if customer any for wondering the on also changed can highlight platform? if past Baer. of Hi, customers you saw Smartsheet to discussion? some is that And you that any

Mark Mader

when -- environment. Sophie, the in think multi we I common a there multimillion front, consolidation quite of it's is that dollar we're others presence have on the seeing, opportunity $XXX,XXX,

where is, commonly the have I of benefit multiple we very think within business. we presence nodes

grateful We situations. space large remain, the really one they over and a quickly. be a the to able going think I is bake-off, high very demonstrate for in I quite those rates this was year, years. XX spoke those in for the were conversion move of we where next the to which account That value to biopharma us

of times still number I are that they So there really say matter. typically far really formal on is few pretty that happen accounts high the would diligence the those and bake-off, but RFP, between,

definitely energy about. do So they those put into when come we

Sophie Lee

great, Okay, much. you thank so

Mark Mader

Sophie. Thanks,

Operator

with the Zukin question of Research. from next is Wolfe line Your Alex

line Your is open.

Alex Zukin

Hi quarter guys, margin the thanks Good for congrats kind guidance. solid taking the of see a on to question. and

Just me. ones two for quick

quarter pressure guided a getting net-new, but customers that maybe in that churn And guess follow-up. impact of if seeing seeing you're little some X%, dig to you have you we then you the macro any clearly macro, the where was what First, quick existing factors I on split-up, in expansions the you bit worse. versus at versus strong bigger what saw renewals? downward I with a if around are from

Pete Godbole

take your I'll pieces. in question So Alex,

of is, So and what with pressure with SMB larger fairly net is expansion sort the and been seen And it on a in has and customers it, rates dollar little there's our of pullback all, and we've smaller relatively happening that we've customers customers. macro. the what's retention seen tied our enterprise strong more the ARR of to the are healthy side first the

we've So play-out. it seen that's how

churn as the I materially said, number We get haven't seen, impacted.

platform. we've fairly the strong So Smartsheet to seen commitment

Alex Zukin

looking XX% or year, terms then, I -- maybe growth is linearity the specifically, is as both? with that talk kind aspiration what of rate algorithm the kind number margin for respect fiscal kind that efficiency -- magic balance guidance, Perfect. in where the And through ability And growth that at the the new we billings contemplate profitability around of of the growth 'XX? to generate of you through should to of exit be guess, net level, this algorithm sales a your about

Pete Godbole

think growth there I'll start and and a in this the that, room we category. big the market long-term. across are is in We're leaders segment the by we So plenty of this enterprise this is saying market market in in bullish the whole and

growth, business grower. So terms when we of the we in this as a longer-term see solid think of this

Now, of we cycles there could through be macroeconomic change. go adjustments as different macroeconomic

it. So that's one part of

we've your on part question moving that be the going to think of we the how second continue forward? profitability We're essentially The is attained. optimizing of and scale to

think scale efficient, So gained, lot the to need to us of lot the more-and-more scale being already just we a gain. to less given every to compared of you the a we resources, we're serve We have to at. a $X cost we've need we're don't And achieved. dollar invest where because in of add terms

through. that's into So and in marketing to continue seeing going the you're sales is playing economics

the as to future itself So in that you're well. see play going

Alex Zukin

Perfect, Thank guys. you,

Pete Godbole

No problem.

Operator

line is question Terry of the next Truist from Your Tillman Securities. with

open. is line Your

Terry Tillman

have Good was. at the Yes, Aaron. I'm Hi, flow it press release times, and afternoon. look I free-cash looking $XXX Mark, and then that surely you. at like three because thank Pete of million

I see questions. to that. great So two have

The follow-up parter the first second I'll and a one multi question on. is then with

is around and product packaging. First question

a take segment? you if in the then How had we I growth about But around follow-up XX% considered is, XX% be now total the X,XXX you or then product looking the I are step-back, segment, customers Advance and revenue. that enterprise. a at about curious if And think thinking I'm Mark in said enterprise penetration of we're that had should we discovery.

Mark Mader

of companies, to out well. XXXX have XX,XXX Hi, be that X,XXX, enterprise. Terry. more obviously again north employees over large many employees. ties We The as It's

still very for Advance. segment. early It really innings is net, large So

the base. -- while larger of a bookings do transactions lot tie-up the to it's a minority that have have, we of We

still are our trying So presented we -- processes people. get people-based out capabilities think in we addition the ways to it's to these to figure

I've working are getting sales outcome do getting on self-discovered some of solution on team state. our to with said on mapping Advanced As we while past product our line our and people, professional into both, calls, able roadshows, advice a

full So what trying to that those means of or having X,XXX its have the capability, in our is, hi, customers leads the access at providing then and having in of thing. using solve, they're demand to people integration, use them talk do Advance a it's We'd really to data, things about context to what which whether this to to us to product saying, whether we presented experienced them discussion those things those inbound ultimately Advance. you like this

the how it really are us now inning data to we economics? we that What that, points connected these flows are enough call still, on as through is needs So What it how Advance helps penetration super on the those? and means understand it, relates people second have that customers. for though adopting large users

Pete Godbole

the revenue us of question across the under rate growth is the and segment? revenue our they on enterprise retention of that rates, of is as really dollar grow was parses customers, -- shared second as can to quick. that, customers, net is largest the Terry, Mark with fastest see growth biggest you we think you large billings our So function and growth this And, out part XX% a how your XX% our our

biggest grow part But well. see you the That's the as $XXX And that growth leads is grow they about most that are medium-term profitable our the the at rate. than our you they faster start. customers is, will referenced what's us scale interesting to which for million -- best the

we're So by pretty those economics. excited

Terry Tillman

it. we've going question. know got Mark, of kind bunch I talked about mean, the following-up part in I discovery past. a guess of first the down just you And product that Yes, the and path of were on the I

books the While know in number is what the product where the there could sheer initiatives of some milestone look these revenue. Thank of of where this on on become go an and year you. just a time at there you could whether capability, the but it's people, unleash technology it's point even where discovery or really a -- probably of around hood, upside this website whether don't You is if AI is all kind they major potentially the under or billings driver or this

Mark Mader

to expect benefit we in beginning the from this Terry, Yes, second-half.

now. So underway right is Engineering

self-discovery Some into our available how the business, it and we with I a innovation don't make have the concept, forecasted new of that new heading will be consistent the into idea, Pete new second-half. yields, And until guide.

if see be would it So, I that to Terry, performs incremental

Terry Tillman

That's great. Thank you.

Operator

question next Your Securities. comes Turrin Fargo with line Wells from Michael of the

open. is line Your

Michael Turrin

the nice the close Hi, with great, job thanks. of question taking I the year. appreciate you and

more people but the I complements think that given prepared prove points on margin heavy, focus expansion how to that? We not you're XX year. implied of into clearly Could free-cash think the remarks, the could next giving case, margin clear. enterprise percentage is given you just flow speak

how what the from current balance expansion you enables that the more can and add focus, the in just in enterprise both you're on So able side margin to environment? and Smartsheet

Pete Godbole

so it. of two-parts Michael, Sure,

low enterprise looking much you we one the for you're we've space their already growth done they've and that's a at The when you dollars number. where, at and in fairly retailing rate they it if of looking have, number, our a creates invest fair is, first how a that's the got, customers growth us what bit. a is, you're better think sort of average really think than by of, our high And is

So that provides margin the for basis the accretion.

marketing. such number We that it impact is and are growing, provides investing in getting to benefit a sales but the but new large natural the base dollar, scale

So that's one part of the equation.

the hire to the hiring number is going of, which people we're the the really people that we part margin lot year story. that simple as And need facts given we same we the equation them to are, go simple don't this year that are lower margin is and Those drive through of accretive. two size think of hired -- second just last of at a part of a

Michael Turrin

in able sure That's the surface point helpful. making to was to prepared And remarks, the that in mentioned improvement then, just I were you also Pete, other capture the you're just guess world. the that whenever

sounds it But the make to balance? natural like grow have striking to thoughtfully into? capacity you sure capacity right add So to some you just you're continue how

Pete Godbole

Yes, we play. motion if the way to it, that that is with -- productivity with shared assisted the goes and sales makes of us, are obviously self-discovery for the going our motion sales we've macro But in think now modeled the we we've line you faster. think modeled our way it we

If the on sales changes force year, with in a that's see already enabled productivity, macro ramp in this ramped you turns because the we've we best brought us, now will and techniques. got it a sales

to we to the which mentioned, can benefit or Mark as put get some That's behind current we those the these ready upside we we're more the things we environment of as energy So of upside as changes we see and initiatives the see can drive there. measure, plan have.

Michael Turrin

Thank you.

Operator

Your question from Pinjalim the of with next is Bora JPMorgan. line

is open. Your line

Pinjalim Bora

the becomes rushing AI of some increasing it kind point to Great. generative us kind use taking the cases, good to of large congrats table Maybe in hear fundamentally, think leaning of and some understand kind you everyone when on you're AI. those questions of the with on models? Hi, how do you at advantage? Mark, more for guys, help of quarter. you thank language but that generative Do implement comparative versus differentiate is kind stakes

Mark Mader

love the question. I Yes,

non-differentiating, embedding don't you participating. say who they're from think think I I it actually separates capability is But those that really can the competition. standard that a sprint towards

the with I distinct unique think paired marriage and between is your generative that's to the what magic. AI, offering,

in manipulation offerings. we of to our asset world about terms quarter design think the major to of workflows outfit management, logic thousands saying, single that whether based in when and Proper, of advanced paired about where images, the app. generation So of the is When think our images, every assets formula cases the we most it's people I with from we unlocked figure value brand and our get how folder Smartsheet out of in in think digital I trying see

AI, generative with generated already which will we logic for think already the formulas of major done and be We've We've a customers. help win design research.

cost, think it's that current not whole that the taking next form, you driving set of in unlocking when a -- step. maybe just from population dissuaded is new the down about it So

are I digital in context and the think tracking asset. the the work. So, designing Smartsheet, of it's in People

is the customers then do inflow vector we center. is generative help it's grounded in percentage when our cases look how trying to of significant. how at from with that the I typically really And get -- it's of AI do all third and come not you break-fix, in, unlock that our I into People

quite that remark the early promising I'm our say remarks, I customers. made our quarters. to out would in means our I pursuing. very customers in And the terms continue in adopter see those three my from we're of program engage for and community out the So bullish vectors us for And to ties that you'll coming what years that

Pinjalim Bora

me it's understand is us strong, structure it, of extremely It Help you. And FCF probably a to XX%, stock-based going respect SBC going but moderate. the Thank guide. -- the on compensation with to in this help Obviously, context understood. fiscal understanding understand there Got seems kind that to number, about is the like that. of question one you versus is change growing on going kind the comp Pete, year? FCF SBC hiring guide is for

Pete Godbole

obviously, as margins GAAP provided, improvement shows we in guide the the well. an So

shows -- a managing stock-based that basically the you and compensation. special it's And we've embeds year. being the So be stock sort based initiatives in the see proportionate margin it we're emphasis non-GAAP taken use to with of GAAP reduce can flat margins consistent And it compensation that improvement. we year-on can to improvement a a element

happens a stock of previous compensation that grants. effect in historical Obviously, there's stacking

compensation. file. we're example to adding convert how of mindful in used which And senior example, of them we stock made into what very That's for to the change others So we're we're be we paid quarter, an to many convert bonuses of managing stock-based to the cash. to the this employees among

Pinjalim Bora

much. you thank it, Got very

Pete Godbole

Pinjalim. Sure,

Operator

is line Markets. Your next of from RBC the Jaluria question with Rishi Capital

Your open. line is

Rishi Jaluria

Wonderful. question. Thanks taking so for much my

a seat the from of macro impact you existing tax. seeing do hit contemplating what layoffs little very wanted to the a from across I you're side? I and side count you what on the kind the I seen have bit what seat customer guess count been that board, of base lot means we've First, and have maybe and the on of seen but reductions and your sort or you know layoffs well-diversified,

got that what can Then arsenal had your of be able you maybe you've kind through and a modeling anything talk you're to quick offset? slightly maybe So to seen follow-up. I far? so or What any counteract you've -- in tools

Pete Godbole

gross that side the of element seeing normal what some you really historical I if call we we movement what to mean, the capabilities first a we're so major expansion, feature we of than unusually And churn not anything We're consider it's see. the are on the on it. expansion that's would from seeing parse but more I not Yes, of think even is, reduction. different what seeing further, of sort the

So it's of and moving aligned lockstep sort in together.

what obviously doing. that to Some part comes we're of down

So we earned the what we means users. They model. People enterprise, It the them. them. usage. ELA we leverage is don't using their we're doing sell same is, we connected for don't which What type are use an seats have concept had as

going when the paying becomes the adding users, helps the side one-off, really are ledger, are That not need. How going what for you on question you then people And keep and where You're really add add? much they what staying don't are of with they're to list? the to have. you to you

Rishi Jaluria

you are modeling, Have wanted better be a sense. seeing assuming other the deal seen Got makes Pete, then when that grow understand. you're that'd also were helpful. question, That's to as it. you you ARR of terms in and the guidance? be embedded Is are a of compression it be Thanks. what deal And call well $X deal $XXX as in that modeling whatever than would case. million in you forward? coming compression -- in or terms kind about macro-related lot million of lower close going less rates, further at And of which you thought impacts your the I up talking ends

Pete Godbole

we've trends the Yes, modeled so, we've seen. Rishi,

deciding close some buying not in is a la And sales happens what some things not thereby the cycles to is, to in modeled have compression degradation people buy, smaller the deal rate. pieces. we carte issue, the as the elongation so and typically that modeled We've

what. I at was It's expansion even still a it's our is and at. rate exist. healthy just I'm in that -- So healthy of the macroeconomic expansion. moderation a looking is expansion healthy phase the looking one which matter rate, is we've guided a to

Mark Mader

last would has one transactions I based as licensing. that also are Rishi, class thing I quarter, of compliance some there think helpful is, the this been is

you choice So use users we new have be you're oh, you have and happens velocity would can discussion discussions the you at which get that ago product made making high level decision an decisioning. agreement this clicking extensively, engaging a with is not, think you a I then with into. if platform, you, are over, connected those here's the value. always the And It's okay, usually compliance, maintaining much interesting. business really now it's quarters that new I it more because around, making you're

Rishi Jaluria

guys. much, so you thank Perfect, right. All

Pete Godbole

Thanks, Rishi.

Operator

MoffettNathanson. line of is from Jackson Ader with the Your question next

Your open. line is

Jackson Ader

Okay, great, thanks questions for our guys. taking

some progression six last that XX close you expense given are that impacted confident deal that to the these things you've of none of made just or concurrently, one, how rate the first cuts and are happening over by The are months? the

Pete Godbole

question the made your made the product in areas. we expense which core Jackson, are selling is, or we answer reductions, short have them to if areas to ancillary

expenses type those support changes, on resources. We've made of that things. made normal we in procurement reduce the we've of dollar So for changes spend example, in value

-- So year. and pretty sales that's going into our we we've one thing maintained the excited capacity actually haven't about we're

or own sales and are to elongated plan how cycles, you business. is making their that's site about So what when they're their about experiencing, you or talk -- really deal about talked customers compression feeling plans of

Jackson Ader

that makes to are scope see. Okay, yes, expect would the outside They you sense. of that

Okay.

Pete Godbole

Thank you.

Jackson Ader

Marketing -- RFP Are units any the feel there installed of finance instances decision, rare sales, -- talking about, And ultimate already business bigger influences units. a might when where you or an got be whether whatever? business marketing, is then on couple outside it company-wide it's have IT Smartsheet is marketing it. we're like in there and that a or

Mark Mader

environment. how think in stored. people it's Those is how how true allow interact ensuring for those to scaled would as are tried you there things and the are I And well both and are information that's user are, certain you that are all pretty population as where with administered, enterprise I responsible safe say, whether that you non-license that in would a being it to licensed, conform, things I stands environment. have tested that non-negotiables, say,

outsized, would and the sort for from say organization standpoint, for which on who are think now functional retention. getting weight right trying growth and I the are I a of scale that both those revenue to

a the organization directly of role today. So presence experience and to I field customer I say, ops, think is any tied would plays financials, larger

Jackson Ader

right. it, All Got Thank you.

Mark Mader

Thanks.

Operator

of line next Your the question Hynes is from with Canaccord. DJ

open. Your line is

DJ Hynes

of more more guys, that's cases, feels the use scrutiny. taking you've It talk category about of some Brandfolder thanks for Hi, outfit. questions. marketing seen with you a oriented seeing like spend just can your that's Mark, what

So would be great observations to get any there.

Mark Mader

Like, creative landing very Yes financial presentation out of value and is concrete benefits. well. I tie arena, to the sort management in they marketing that conversations think of

are being things being clear managing, on of think more better more the important, a confident to work about enough more little terms probably in bit scales. status nature but still something, you're not is I qualitative tip the in the

most done, get resource or actually your marketing of elimination now, on discussions based third-party solution of company. that the the that our grounding it then large of the we're So work and completion accelerating work, is for what in of quantification asset that yielding to campaign

the that. Pete, to right, really their quantify market about more weaken the And marketing more no very teams I value, interested the offense, that to in in -- CFOs, to presenting our marketers how get think confidence. are People going learn much

promising the I marketing for it's -- organizations, a year actually So newer think ahead. many but arena quite for it's is it

DJ Hynes

helpful, That's Pete, then, for thanks. okay. Yes, you. And follow-up just a

going I the that are think in But in margin invest the want want did investors to relative help big year some context you of 'XX next thinking of continuing I for what to fiscal can fiscal and ask, beyond. reason and and answer. is 'XX I the to what you're question in sales won't look, to upside know Maybe frame we're capacity like, fiscal like, kind positioned 'XX? growth in this you of you adding and assurances So

folks. for helpful be would there color any So

Pete Godbole

we're So, DJ, think, committed to growth. I

of growth that efficient think So a coming more from model.

So, effect of our renewal, bring for terms what base if we need. it size bringing lower That of than dollar that is that cost in cost to is how is that resources The the we or into base quite much think many you economic simply, in in going to new service the of business. for what stack takes

this And hire. will going well. hire as year to now continue we to We're

classes next than size year, be we've the will in what historically done. but smaller hire will We

our an to plan as see So to you margin a longer-term part margins. of accretion grow

DJ Hynes

Thank Appreciate okay. you, guys. Yes, color. the

Pete Godbole

No problem, DJ.

Operator

next Your the Berg with question Needham. Scott is of from line

is line open. Your

Scott Berg

$X company on guess, everyone, $X this of, pretty the question I taking look revenue Mark, I is start with does I the run-rate, congrats close a guess, at run-rate. totally think? you nice Hi, do to kind questions. wanted agenda, for of a billion is my results the to Smartsheet different How Thanks differently quarter. a billion

Mark Mader

in -- be that experienced that'll be the present billion. at $X of many having will enrollment, I a more Smartsheet, Scott, customers much think very the diversified

So thousands companies about from Advance. benefiting of today talk we

more complete couple thousands much Smartsheet a a see think, of now, we're from of going experience. I years having to tens of organizations

another you So at product? have Analyst on would said, information most now. ago have possible give like a perfect thing. I what's years what, your couple the You customers thing know me don't what's in the to someone want Day, to of

those Fortunately, bunch two capabilities the our want land customer. it I years, have got in assets, but a I those to medium of with whole

that just power of hard get customer that customer mid but emerging how do and working to upper the large, largest even not the the in you understand of are midsized to very we the customer cater So to platform.

across Smartsheet, PPM, on is it complete whether I you to So disciplines cross are more various much to marketing going product the experience a of within core much transformation, have suite you're it's it's believe it's strategic have management, management, going connected usage. work more

not towards more middle a I you see but sophisticated customers be in, hundreds driving using say, per would you doing average customer. only will will And of what us have at-scale -- things. And of that very of contribution the customers, also today, That evidence significantly result higher band. it's the

meaningfully the ASP of few as next our will that. So years result climb over a

Scott Berg

directly, from discussion increasingly or to given but that's of partners maybe view of your recently partners of macro, seeing you sales different past? perspective, becoming they going a your of, brief surprise sell partners, obviously, opportunity recent very process then that. all do helpful. I is on think on, out more lot important And you with how to what's but working a not follow-up than component what you Got necessarily some seem it, the Are not of have anything influence the in continue

Mark Mader

of is this has our set I'll this start. global of one Scott, for a and large did a who -- Smartsheet for In the Building workflows platform. Like video talking SIs to the on I kick-off -- to solutions practices. message global a I the message of time send to behind one transaction Smartsheet. every the left SI, for Every the divestiture leave to Every practice Smartsheet. by industry navigated this with with completed, M&A those project continuing the Smartsheet single they single transaction customer within being is customer site post and do global they backboned operations. it is

would most play have I hundreds of the is those are of three was in a experience high-impact, ones, global never are we have SI. that still is, that co-selling give say few notable contributing of practices around range not those them us it SIs middle have them and the midsized are me closing in we of sort as types us. one It do do ones of that developed of with ago, those influencing. So who a years who as existed. is terms just in they hundreds players of much SI, confidence discussions, types now. really independent We more the deals of But We much and larger those right

Scott Berg

again on quarter. Congrats this results Okay, great. nice

Mark Mader

Thanks, Scott.

Operator

Robert of line D.A. the from Simmons is question next with Your Davidson.

is open. Your line

Robert Simmons

thought of keep valuations process much M&A bit on of generally bandwidth? do questions. capacity Hi, further on maybe balance of what federalized and sheet, given your have kind was thanks cash your need way taking my little the for wondering, and or how what's kind kind privately, doing are your I to come you down currently

Pete Godbole

So, when relative we our to that, they approach cash M&A our and margin to for adjacencies but want have a model. have look up, healthy come balance we been they accretive has to to be

clear So we're have not doesn't clear looking or M&A ROI. for a payback a that visionary

So that's been our strategy.

aggressively. that pursue to continue We

Robert Simmons

terms quantitatively, performing? talking about And existing performance? the Can has it. approach perhaps. of you more about it us Outfit when you actual one. tell like before in been then, an did like how Got Will

Pete Godbole

that is way with deals. good is you're of it integration, you effective I a about part that was the performed even to Outfit through. need we're kind -- and templating product sort Brandfolder makes of seeing doing Outfit tags So, when -- job. it really, what Brandfolder of Outfit a expectation along went synergistic a really call, thinking and as We're that Brandfolder our we more about effect between comes when this compelling The

Robert Simmons

much. very you thank Great,

Pete Godbole

You're welcome.

Operator

question Jacob from line of is next the Roberge Blair. Your with William

Your line open. is

Jacob Roberge

pretty on slight close especially sales still congrats was growth strong you're new and Hi, good Understand guidance. bookings with rates new a seeing are that user there degradation some activity results see. great number. on and in Those customer cycles, to but profitability the

or there stood on that but segments small verticals front? that start customers particular industry Another were any out

Pete Godbole

the our to capabilities in activities from and out and come nodes user, seem us, which come segments with they with what can companies what new new largest resonating forward, very be a that I our product coming seeing is that early. be launched for lot they at customers is, largest We of strong within think, look new essentially customers companies, in the really we're you hearing launched that are etcetera. are

it's start sometimes with started, We with they new says, what deals deciding get Advance they to with do us gets Advance. in primitive they with they that lift as a internally productivity they the start customer, the need. wanted that want, don't surprises somebody them still but That just

Jacob Roberge

risks, perspective. It of seems in what and your any are competitors changes? seeing you're love Okay, out would great. competitive then, a started continue the a to fairly pretty competitive calling those to some the undergoing as obviously you from large some just well. on some seeing headwinds like market of in while and you're benefits result pipeline execute touch Have

Pete Godbole

is, we two are So happening. what seeing things

for better, is we which market cost word, are statement the everything the marketing or is, ad the about side, et-cetera, proving the And gotten over is on competition macro hiring then, thing has is one First easier. talent there. finding is -- lead done, obviously a be for dropping we've to The

So fronts. on we're two benefiting those

Mark Mader

pursuit, our of very investment quickly, I pursue, value teams where the seeking rarely existing footprints, in really and opportunities -- large that process greater demonstrating we the of that's at customers our are larger are contested. highly pretty have the change. It's they those It's one think in client. a we from rare us growing of terms that established platform that our reconsidering in considering

sales median for cycle us. or So it's we that really the manifest -- haven't seen

Jacob Roberge

questions my again results. on taking congrats for the thanks Great, and great

Pete Godbole

Thank you.

Mark Mader

Thanks.

Operator

Your line final question Enders Citi. of from comes the Steve with

Your line open. is

George Kurosawa

linearity like things Thanks the worse taking on squeezing you is if of could It George sales you this I sounds be saw me degree Steve. on guess, just rates Hi, for and quarter? cycles. macro, my progressively questions, for the the in. got discuss may on through conversion the

there. just So, any comments

you. so then, seen Thank March what you've And February in far? and

Pete Godbole

degradation we place builds as between January of and some We out play quarter. to elongated elements took that which the looked a I described quarter December the -- and progressed it through call saw. the close that degradation, we through quarter degradation you sales cycles rates moving function at out, some November saw I element describe I as the what call could played how what as was before. the into The we of that like macro So, and

first So that's part it. the of

built-out. February so-far a is What expected which think of is to have the But the which part of with first our continue, start, quarter. to February? have got is we've consistent a essentially trend observed we guide in we the month I off

improved the what worse marginally sales I seen state tad sort of have. sort bit, the rates call, sort cycles, they of a have close not than and of We

So out. this that's how plays

George Kurosawa

if have follow-up guidance just That's sort lead of one you on Got flow? regardless to macro that all would according sales kind your I that is wanted and Or of quick are this any the to kind KPIs it. then side, that see today? to you is see Thank and kind there investment forward ramped of understand this sort of of And force helpful. on turn that going marketing of you're margin spend. you and you. of kind sales what might you plan in the with

Pete Godbole

George, seeing on our is think, reading and model sort signals based I of what out. the comes

I see allows there, is, we stability sort describe will on a ROI, op to as the long payback So margins, it if macro us provides one opportunity, and we which it. continue is to would revenue of you side invest, of as to the but accelerate the

good internally, We will we for something we to driving generate it's has and ROIs. the see with, things that same do thing legs example,

approach it. We That's will taking. the we're continue to invest behind

Operator

over now to will Aaron turn I time, call the this At Turner. back Mr.

Aaron Turner

next joining us for again talk quarter. everyone, to Thanks, this and Great. quarter we'll you

Operator

gentlemen, This Ladies for thank conference participating. concludes and call. today's you

disconnect. now may You

Smartsheet (SMAR) 13 Mar 232023 Q4 Earnings call transcript